Stakeholder Letters

At the Mortgage Bankers Association’s (MBA) Secondary Market Conference & Expo last month, MBA Chief Executive Officer Dave Stevens urged the housing finance industry to take action – “It is time to restore a vibrant secondary market that can function for the long term; one that is most reliant on private capital, but with a functioning system where a government guarantee ensures liquidity when the market needs it most. It is time for a clear pathway to transition.”

Ginnie Mae commends Mr. Stevens and the MBA’s position and commitment to helping drive change to our nation’s housing industry. Like the MBA, Ginnie Mae agrees that private capital must play a prominent role in the future of housing finance, particularly as it relates to bearing credit risk. Also, like the MBA, Ginnie Mae believes that the system must offer a government guarantee that ensures liquidity in times of economic stress.

Ginnie Mae President Ted Tozer recently authored an article for Mortgage Banking Magazine’s May 2013 issue, titled “The Evolution of Ginnie Mae,” that discusses many of these same objectives. Regardless of the future structure of the industry, it is important that interests across all stakeholders be aligned. Underlying assets should come with robust disclosures. And, we must preserve a well-functioning TBA market to ensure broad access to capital and liquidity. Reform requires strength and stability. Ginnie Mae is committed to doing its part.

We have many initiatives underway that will help us strengthen liquidity, bring more capital to the market and, ultimately, better support the housing finance system. One way we are looking to do that is exploring the possible consolidation of the Ginnie Mae I and II programs. Ginnie Mae IIs have been largely favored over Ginnie Mae Is over the past few years, due in large part because of Ginnie Mae IIs’ larger pool size and increased pooling flexibility for Issuers. In April 2013, Ginnie Mae II single-family issuance totaled more than $31.20 billion, while Ginnie Mae I single-family issuance was only $6.61 billion.

The possible consolidation of Ginnie Mae I and II has received a substantial amount of attention recently, not only from our Issuers and investors, but also from others across the industry and the media. It was widely examined during MBA’s Secondary Market Conference and was the focus of recent news articles by Bloomberg News and National Mortgage News. Ginnie Mae has been meeting with Issuers, investors and other stakeholders to discuss the possible pros and cons, and help address any questions concerning the impacts of consolidation. We will take a deeper dive into the possible consolidation in future communications and will keep you informed of any new developments as decisions are made regarding this important issue.

Ginnie Mae is also helping to provide liquidity in connection with mortgage servicing rights (MSRs) through the use of acknowledgement agreements. These agreements allow servicers to pledge MSRs as collateral to third party creditors. Since rolling out a new version of the agreement last year, many Issuers have taken advantage of the opportunity to help finance their MSRs and raise capital.

In addition to bolstering liquidity, Ginnie Mae is also focused on ensuring that its securitization platform can effectively meet the challenges of a changing and growing mortgage industry. As noted in last month’s stakeholder letter, Ginnie Mae’s securitization platform is currently undergoing a comprehensive, multi-year modernization effort. This effort includes a substantial upgrade to Ginnie Mae’s Integrated Pool Management System (IPMS), the implementation of MISMO data standards and the introduction of loan-level disclosure. These efforts will provide the organization with more agility and a greater ability to sustain long-term business growth.

These initiatives will help to preserve the health of Ginnie Mae and its programs. As we continue to evolve, it is our responsibility to take the necessary steps to ensure Ginnie Mae remains a strong and stable leader in housing finance. The same can be said for the entire market. As Mr. Tozer stated in his recent article, “Now is the time for the industry to go back to the basics.” We believe that together we can create the right solution and pathway forward to make sure we have an efficient and sustainable housing finance system.